With the economy seeing a slowdown in lending to the private sector, the central bank’s reforms in the banking sector will lead to a pickup in loans and advances to businesses in the coming years, Minister for Information, Kojo Oppong-Nkrumah, has assured.
This, he said, will allow business owners to easily access more funding on a more sustainable basis from financial institutions.
“We are beginning to see that as we correct errors in the banking and the financial services sector, credit to the private sector is going to pick up again – and it is going to be more sustainable with the necessary credit risk levels adhered to. That gives a lot of hope to the young people who are hoping to get credit to also further their business needs,” he said.
The minister said this when he was addressing participants at the maiden edition of the Standard Chartered Budget Forum, organised by Standard Chartered Bank Ghana Limited at the University of Ghana in Accra.
Mr. Oppong-Nkrumah added that as government works to reform the banking sector, while reducing inflation and interest rates, banks will be more willing to lend to businesses – especially indigenous start-ups.
“As we deal with the macro side by bringing down things like inflation and interest rates, the banks know that they cannot make so much money from Treasury bills and they have to lend some more money to young people; and so, they can also have the opportunity to get some more credit and do some business in that space,” he said.
Figures from the Bank of Ghana’s Banking Sector Report for May 2018 indicate that loan advancement to businesses in the private sector has been on the decline.
“Private sector credit (comprising loans to private enterprises and households) recorded a contraction of 2.7 percent in April 2018, compared with the 2.8 percent growth recorded in April 2017.”
The share of indigenous private enterprises’ credit, which is the largest subcomponent of private sector credit, according to the report, also declined from 62.3 percent in April 2017 to 60.5 percent in April 2018.
“The banking industry’s stock of gross loans and advances stood of GH¢36.75billion as at end April 2018, which is a contraction of 5.9 percent year-on-year in real terms compared with the 3.1 percent growth in the same period last year. This was on the back of excluding gross loans and advances of the defunct UT and Capital banks, as well as an increase in recoveries (partly due to proceeds from the ESLA bond) which offset new advances granted within the industry,” the report further said.
The minister however urged young entrepreneurs to take advantage of government intervention programmes, such as the National Entrepreneurship and Innovative Programme (NEIP), to get the opportunity of accessing both funding and training on how to run a business.
“Young people have the challenges of capital and technical know-how to run a business. I keep telling people that having a business idea is not the same as having the know-how to run the business – they are two different things. So, young people need skills in running a business as much as they need capital for running that business.
“Thankfully, under NEIP the various elements come together; a bit of money and a bit of technical support. Part of that money is also going to the Venture Capital Trust Fund, so that young people who need credit, training, and cooperate governance can access it to go about their businesses.”
Addressing the students present at the post-budget forum, Jojo Bannerman-Head of Financial Markets Sales at Standard Chartered Bank said: “We have been in Ghana for over 120 years, supporting the Ghanaian economy and business and trade activities of Ghanaians. Over the years we have not only banked the people of Ghana, but we have also connected to our clients and stakeholders through various initiatives – and the budget forum, which is a partnership with the University of Ghana Economic Society, is one of such initiatives.
“We believe that as future leaders you have significant contributions which can positively impact the nation’s budget and discourse, and that is why we have decided to partner with you to engage on the country’s budget. All of us must be interested in the budget, because it impacts us in one way or another,” he added.